Egypt awards bids for exploration in Mediterranean Sea

4/17/2013

Egypt awards bids for exploration in Mediterranean Sea

CAIRO -- State-run Egyptian Natural Gas Holding Co. has awarded eight oil and gas exploration bids in the Mediterranean Sea for an overall minimum investment of $1.2 billion as the country seeks to increase its oil and gas production and reserves.

BP, Ireland's Petroceltic International, Eni, Edison and IEOC, a subsidiary of Eni group, Canada's Sea Dragon Energy, United Arab Emirates' Dana Gas and Australia's Pura Vida Energy won the blocks, the oil ministry said in a statement posted on its website late Tuesday.

The awards were the result of an international tender which received 13 offers. The winning companies will drill a minimum of 18 wells and will pay $73.2 million for the licenses, it said.

"Issuing international tenders is part of the ministry of oil's strategies to intensify oil and gas exploration activities to secure new energy supplies...and encourage international firms to pump more investments in research, exploration and development," energy minister Osama Kamal said in the statement.

Mr. Kamal has previously said that investments in oil and gas exploration are expected to reach $8.6 billion this year.

Egypt has seen its oil and gas exploration activities slowing over the past couple of years due the continuing unrest since the ousting of former president Hosni Mubarak. The country has been paying hefty premiums for its crude supplies due to the weaker Egyptian pound and difficulties in securing letters of credit for its transactions, while a shortage of state-subsided diesel has already paralyzed transportation in many parts of the country.

The civil unrest has also led to a risky economic mix of dwindling foreign-exchange reserves, declining tourism revenue and costly price subsidies, economists said. To prop up the Egyptian currency, the central bank has gone through nearly two-thirds of its foreign-currency reserves, pushing the country to the brink of a liquidity crisis.

Egypt is in the throes of trying to secure a $4.8 billion loan from the International Monetary Fund, a move viewed as critical to rescuing its economy and mending its reputation as a place to do business.

People close to the talks say the IMF wants to see Egypt reduce its subsidy spending as part of a reform plan for the loan. But any subsidy changes will likely only enrage further the legions of poor who rely daily on cheap fuel, making the already uncomfortable summer months all that more unbearable.